What the study found
The study found that stock splits were generally associated with positive stock returns in the Indonesia Stock Exchange during 2022-2023, while reverse stock splits were associated with negative returns. In the abstract, these patterns are described through changes in cumulative abnormal return, or CAR, which compares actual returns with expected returns.
Why the authors say this matters
The authors conclude that stock splits are viewed as positive signals about a company’s future performance, while reverse stock splits are often interpreted as signs of possible financial or operational problems. The study also says this may help managers, investors, and regulators make more informed decisions in dynamic capital markets such as Indonesia.
What the researchers tested
The researchers examined the impact of stock splits and reverse stock splits on stock returns around their effective dates in the Indonesia Stock Exchange. They used an event study method and a cumulative abnormal return, or CAR, approach over a 10-day window before and after the corporate action.
What worked and what didn't
For stock splits, CAR increased significantly before the effective date, which the abstract describes as a favorable investor reaction. For reverse stock splits, CAR declined sharply on and after the effective date, indicating a negative effect on stock returns.
What to keep in mind
The abstract limits the study to the Indonesia Stock Exchange and the 2022-2023 period. It does not provide additional limitations beyond this scope in the available summary.
Key points
- Stock splits were generally associated with positive stock returns in the Indonesia Stock Exchange.
- Reverse stock splits were associated with negative stock returns.
- CAR, or cumulative abnormal return, was used to compare actual and expected returns.
- The study used a 10-day window before and after each corporate action.
- The authors say stock splits may signal better future performance, while reverse splits may signal problems.
Disclosure
- Research title:
- Stock splits and reverse splits affected returns in Indonesia
- Authors:
- I Made Suidarma, Ni Wayan Okta Prasetya Putri, Putu Ayu Suan Dewi, I Kadek Krisna Ari Putra, I Made Sara, I Dewa Nyoman Marsudiana, I Made Suidarma, Ni Wayan Okta Prasetya Putri, Putu Ayu Suan Dewi, I Kadek Krisna Ari Putra, I Made Sara, I Dewa Nyoman Marsudiana
- Institutions:
- University of National Education, University of National Education
- Publication date:
- 2026-03-08
- OpenAlex record:
- View
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